Joy Christian School settles with state

It collected tuition but used publicly paid teachers

by Pat Kossan - Jul. 19, 2011 12:00 AMThe Arizona Republic

A private Christian school in Glendale violated the Arizona Consumer Fraud Act when it teamed up with a public charter school to teach its classes while also accepting tuition payments from parents unaware of the arrangement, according to a settlement reached by the Arizona Attorney General's Office.

Joy Christian School agreed to pay $165,000 as part of the settlement and has dissolved its partnership with the charter school.

The settlement, announced Monday, joined legislative action taken by the state in 2010 that addressed loopholes or abuses related to Arizona's private-school tuition tax-credit program. A 2009 series by The Arizona Republic detailed the questionable practices.

Tuition collected by Joy Christian School included donations made by parents using the private-school tax-credit program, which allows taxpayers to reduce their state income-tax bill by donating to fund private-school scholarships.

Arizona Department of Revenue records show Joy Christian School accepted $559,000 in donations for 273 scholarships through the tax-credit program in 2009.

But the findings of the Attorney General's Office focused on consumer deception: While the state was paying a charter school to provide teachers and elementary and high-school courses for Joy Christian School, Joy Christian was collecting thousands of dollars in tuition payments from parents.

The Republic reported that Joy Christian School was charging parents $6,710 to $8,000 in annual tuition per child at the same time the state was paying Sequoia Choice Arizona Distance Learning, a charter school company, to provide core courses.

Joy Christian School officials did not return calls Monday.

In the agreement, the private school did not admit to violating any laws but agreed to pay the following amounts:

- $30,000 for each of the next five years to help pay tuition for low-income students.

- $10,000 into a fund to make partial refunds to parents who paid tuition during the time the state-funded public school was operating Joy Christian School.

- $5,000 to the state for partial payment of the cost of the investigation.

The private school, which is affiliated with the Community Church of Joy, replaced its own teachers and curriculum with Sequoia's teachers and curriculum from November 2008 through December 2009, the settlement stated.

During that time, Joy Christian School taught only a Bible class, art, music and physical education while continuing to charge tuition.

Several parents complained to the school and contacted the Attorney General's Office and The Republic. After one parent, Lise Hopson, disclosed the issue, Joy Christian School kicked Hopson's children out of the school.

"For us, it's not about money. We just wanted them to be held responsible so they didn't do this to other people," Hopson, who lives in the Valley, said Monday.

"I think it's awesome that they're going to have to put money into helping other kids go there who can't afford it," said Hopson. One of her children now attends a different private school, and the other attends a public high school.

Sequoia Choice Arizona charter school did not face a penalty for its role in the arrangement because while it provided teachers and courses to Joy Christian, it did not accept any money beyond its state funding, the settlement said.

"At the end of the day, Joy Christian School is a private school that has its own mission," said Ron Neil, Sequoia's superintendent. "We tried to assist them when they asked for our assistance. I don't know what's right in this case. I'm just glad it's over."

The Republic's investigation into private-school tax credits found that the program, originally intended to help low-income children, often benefited wealthier families and had little state oversight.

Last year, the state Legislature approved a law that requires state tuition organizations, which collect and distribute the tax-credit donations as scholarships, to register with the state, conduct annual audits and consider the financial need of students who receive scholarships.

THE TUITION TAX CREDIT

Many unknowns

Key areas that have allowed the tax-credit system to flourish with few controls:

Loose oversight. School-tuition organizations, or STOs, don't have to file audited financial statements. The Arizona Department of Revenue doesn't have resources to routinely monitor those who claim the credit or the private organizations holding the money. The non-profit STOs are unlikely to be audited; the IRS audits only about 1 percent of all non-profit tax returns annually.

Vagueness in law. The law requires 90 percent of an STO's revenue go to scholarships. Most donations come at the end of the year. So STOs routinely fail to meet the 90 percent rule in the same year. The law prohibits taxpayers from making donations for their own children but allows parents to strike deals to give to each other's children or enlist friends and family members to donate.

No penalties. The law doesn't provide any fines or punishment for STOs that fail to follow the law.

Lack of transparency. It is not clear who benefits from the scholarships. The law was billed as help for the poor, but it's unclear how often that is the case. There is no way to track performance of students or schools.